• December 1, 2022

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Each year, the Internal Revenue Service (IRS) makes rounded inflationary adjustments to the federal income tax brackets and the income phase-outs for various tax deductions and tax credits.

Although IRS Publication 17, Your Federal Income Tax, and IRS Publication 970, Tax Benefits for Education, won’t be updated until 2023, the IRS usually publishes the updated numbers in a Revenue Procedure in late October or early November.

Tax Brackets

The tax-rate tables include seven tax brackets, with the following income ranges.

The Kiddie Tax thresholds are increased to $1,250 and $2,500.

The refundable portion of the Child Tax Credit has increased to $1,600.

The maximum Earned Income Tax Credit is $600 for no children, $3,995 for one child, $6,604 for two children and $7,430 for three or more children. The earned income tax credit is not allowed if the aggregate amount of investment income is more than $11,000.

The tax rates for estates and trusts have four brackets.

The standard deduction has increased slightly.

The Alternative Minimum Tax (AMT) exemption is $81,300 for single filers, $126,500 for married filing jointly, $63,250 for married filing separately and $28,400 for estates and trusts.

The income limit for certain capital gains tax rates has increased.

Income Phaseouts

There are several different income phaseouts for education tax benefits.

The Tuition and Fees Deduction has been permanently repealed.

The income phaseouts for the American Opportunity Tax Credit and Lifetime Learning Tax Credit are not adjusted for inflation.

The income phaseouts for the Coverdell Education Savings Accounts are not adjusted for inflation.

Income Exclusions

Annual Gift Tax Exclusion: $17,000

Lifetime Estate and Gift Tax Exclusion: $12.92 million

Foreign Income Exclusion: $120,000

Retirement Plan Contribution Limits

Roth IRA contribution limits remain at $6,500, with an additional $1,000 catch-up contribution limit for workers age 50 and older. The income phaseout on contributions is $138,000 to $153,000 (single and head of household), $218,000 to $228,000 (married filing jointly) and $0 to $10,000 (married filing separately).

The contribution limits for 401(k), 403(b) and 457 plans increased to $22,500, with an additional $7,500 catch-up contribution limit for workers age 50 and older.

The contribution limit for SIMPLE retirement plans increased to $15,500, with a catch-up contribution limit of $3,500.

The income limit for the Saver’s Credit is $36,500 (single and married filing separately), $73,000 (married filing jointly) and $54,750 (head of household).

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